National Puts Policy-making At Top, Decisions At Bottom

March 06, 1985|By Dallas Morning News.

NEW YORK — For years, business trips into New York City have been strange experiences for Rajiv Tandon.

It wasn`t that the general manager of car rentals and vice president of National Car Rental System Inc. didn`t enjoy Manhattan. It wasn`t that he had a dislike for travel, either. It`s just that Manhattan, with only two National outlets, clearly was the Minneapolis-based company`s Achilles heel.

There`s no room for weakness in an industry as competitive as the car-rental business. The top three--Hertz, owned by RCA Corp.; Avis, whose parent is Beatrice Cos.; and National, a unit of Household International Inc.--seem to be waging a knock-down, drag-out fight.

If that weren`t serious enough, below those three are equally adept competitors in the form of Transamerica Corp.`s Budget, as well as some of the regional rental companies, including aggressive Alamo in Florida.

Within this scenario, National said it had taken on 21 percent of the domestic car-rental business, compared with Hertz`s 32 percent, Avis` 25 percent and Budget`s 15 percent.

When bottom-line results are considered, National has been the star performer among the top three.

Last year was a record year for National. Net income reached a high of $37.4 million, up from $29.6 million in 1983. Revenue surged to a record of $698.2 million from $558 million.

That performance gave National 10 years of gains in the last 11, with only the recession year of 1982 bucking the trend. Hertz and Avis have been unable to match that performance, and National executives aren`t surprised.

``An extremely high demand for car rental helped to make these record results possible,`` said Bemiss Rolfs, National`s president and chief executive officer, ``but we were also able to put into place some internal efficiencies that contributed to our excellent year.``

The ``internal efficiencies`` are a result of an overall corporate strategy that sets National apart from the competition. It is a simple, decentralized philosophy that permits decisions and actions to be implemented quickly.

It is a strategy that allowed National to reach what its management believes is ``parity`` with Hertz and Avis. It is also a strategy that allowed the same management not to worry about the lagging Manhattan market until it was ready to worry about it.

That time has arrived.

In 60 days, National will begin a Manhattan expansion to 8 to 10 offices. At the foundation of National`s success is the idea of simplicity: Goals and aims are set at the corporate level, but city managers are given a great deal of autonomy to react and respond.

``One of the reasons we have been so successful is that our overall business strategy is more decentralized than our competitors`,`` Tandon said recently during a visit to New York. ``We are centralized in devising the operating policies, but we are decentralized in implementing them.``

To illustrate this philosophy, Tandon cited last summer`s Olympics in Los Angeles. Although the games were an artistic and commercial success for their organizers, they were a business bust for many companies anticipating a flood of tourists into the Los Angeles area. The car-rental companies were among those expecting a gold rush.

When it became clear that the tourist stampede wasn`t going to materialize, there was the problem of too many cars sitting idly in the Los Angeles area. Tandon said Hertz and Avis were stung because they weren`t able to respond to the unanticipated development.

Gerald A. Holtzman of Value Line Investment survey agrees.

``There was no gold for RCA during the summer Olympic Games,`` he said.

``Hertz misjudged the business it expected to get in Los Angeles and had to bear the cost of too many unrented cars. Whether that was bad management or what, I don`t know.``